The thrill of gambling is exhilarating. Am I going to win? Am I going to hit it big? Put it all on the line and see what happens. I am not a gambler at all. I am a realist, a numbers person. I don’t feel comfortable just hoping on the long shot. Today, in our industry some dealers are advertising on a long shot. There is no science, no reason, just hope that their initiatives sell more cars. Let’s talk about some numbers; NADA states that the average store spends over $500 in advertising for each new vehicle sold. Due to other factors, that number is probably closer to $800 or more for each vehicle sold. The typical store will only close 22 percent of their ups, 40 percent of those never create a cash repair order and a full two-thirds of those customers are gone by the time they truly become valuable, which is when their vehicles reach 30,000 miles. The customer that does remain loyal is seven times more likely to repurchase from your dealership and on average will create an additional $900 in gross profit per unit for the dealership. Additionally, by keeping loyal customers we pick up amazingly profitable service business. Unfortunately, most dealers don’t allocate a budget for owner retention efforts, and the dealerships that do only allocate minimally.
It is amazing that dealers ignore their own database and default back to that gambling mentality, choosing a shot in the dark versus science and math. If the same 2 percent in your own database purchase every month and the typical store has an active database of 6,000 to 10,000 customers, think about the potential. Then get sick over the fact that you have not created loyalty with these people. Every month, 120 to 200 people from your store purchase and you have done little to say, “Buy from me,” unless they get that generic mailer.
